President Obama and congressional Democrats on Wednesday marked another major legislative milestone as he signed into law a sweeping overhaul of the nation’s financial regulatory system.
In the face of strong opposition from both Republicans and financial industry groups, an exuberant Mr. Obama argued that the new law would empower consumers, put an end to the era of taxpayer bailouts and bring “the shadowy deals that caused this crisis into the light of day.”
With Senate Banking Committee Chairman Christopher J. Dodd and House Financial Services Chairman Barney Frank - the main architects of the bill - at his side, Mr. Obama signed into law a third marquee legislative goal, alongside the massive 2009 economic stimulus package and the national health care law approved earlier this year.
“In the end, our financial system only works - our market is only free - when there are clear rules and basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system,” Mr. Obama told a crowd gathered at the Ronald Reagan Building and International Trade Center. “That’s how we will ensure that our economy works for consumers, that it works for investors, that it works for financial institutions, that it works for all of us.”
Only a small handful of House and Senate Republicans voted for the final package, with GOP leaders warning the law would constrain the economy while not dealing with the real causes of the global financial meltdown that began in 2008. Indiana Rep. Mike Pence, chairman of the House Republican Conference, said the GOP should seek to repeal the law if the party recaptures Congress in November.
“We need to repeal this big government program and replace it with common-sense reform that protects taxpayers from bailouts, helps put Americans back to work and deals with [mortgage finance giants] Fannie Mae and Freddie Mac,” Mr. Pence said.
The law creates a new watchdog agency within the Federal Reserve charged with protecting consumers in financial transactions and gives the government more power to break up failing companies. It also gives the Federal Reserve more power while subjecting it to greater congressional oversight.
“Passing this bill was no easy task,” Mr. Obama declared. “To get there, we had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change.”
Mr. Obama said the law’s regulatory changes would end the practice of taxpayer-funded bailouts of giant financial firms.
But critics dispute that, noting that the law does permit the Federal Deposit Insurance Corp. to borrow taxpayer money from the Treasury Department temporarily to help cover the costs of winding down a collapsing large firm. Other large banks would have to pay back the Treasury Department over time.
“All told, this bill would impose 533 new regulations on individuals and small businesses, regulations that will inevitably lead to the kind of confusion and uncertainty that will make it even harder for struggling businesses to dig themselves out of the recession,” Mr. McConnell said in a Senate floor statement Wednesday.
Though passage of the financial overhaul represents a major victory for Mr. Obama, his to-do list remains long. The administration faces long odds in getting a comprehensive energy bill from this Congress, and hope is fading as well for quick action on a comprehensive bill to overhaul the nation’s immigration laws.
Attending Wednesday’s signing ceremony were much of the congressional Democratic leadership and several prominent bankers, including Vikram Pandit of Citicorp and top executives from Bank of New York Mellon and Barclay’s PLC.
Noticeably absent, however, were JPMorgan Chase & Co. CEO Jamie Dimon, a past Obama backer, and Goldman Sachs Group Inc. CEO Lloyd Blankfein. Mr. Dimon has been vocal in his criticism of some provisions in the bill.